Barry Ritholtz, the well-known Big Picture blogger, stopped by the Markets Hub this morning to give his take on this record. Part of the rebound from the March 2009 lows is based on market fundamentals, he said. But a big chunk is courtesy of the Federal Reserve and Ben Bernanke.

“At least the first part of this rally is a rock solid foundation,” he said. “The second half, the argument goes, is built on inorganic matter, primarily Fed liquidity and generosity.” If the Fed wasn’t doing QE4, the Dow would probably be 20-30% below where it is now, he said.

Ritholtz stayed around for another segment, with Steve Russolillo, where we discussed the whole Fed/fundamentals debate. The fundamentals argument rests to a great extent upon the recovery of corporate profits, rather than the Fed’s massive stimulus efforts. But, Ritholtz pointed out, the Fed’s liquidity train has been a big boon to corporate balance sheets.

“You cannot understate the impact of the Federal Reserve on corporate earnings,” he said.

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Comments (5 of 6)

If the Fed wasn’t doing QE4, the Dow would probably be 20-30% below where it is now, he said.

And the world would be a better place.

Nothing like an inflated DOW that ultimately is worthless.

Why does he play us for suckers?

Why do we let him?

3:31 pm March 5, 2013

Marc wrote :

I made the mistake of getting out of the market in 12/2011 and haved missed out on probably 20% worth of gains. After following the market closely for the last 14 months, I'm not sure I will ever be confident enough to reinvest in it given the amount of manipulation done by Uncle Ben et al.

3:27 pm March 5, 2013

Alan Wells wrote :

Dear Chairman has implicitly devalued all interesting bearing assets) to nil. Stocks are rising because of the lack of better options. When either he takes his foot off his Volt accelerator, or inflation pulses the brakes, this rally will come to an abrupt halt. The question is when, of course.

3:27 pm March 5, 2013

Flash Gordon wrote :

People always say this but I don't get it. I was in a phd level class in economics. Fed buys bonds, credits the selling banks account with no offset (creating the high powered money), multiplier gets applied, bingo! that's how increasing the money supply works. But now it's Fed increased the money supply and it went into this market or that market. The fed is directly giving money to speculators who can invest it as they please?

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